Chapter 16: Q23E (page 753)
Prepare journal entries to record the following production activities.
1. Paid overhead costs (other than indirect materials and indirect labor) of \(38,750.
2. Applied overhead at 110% of direct labor costs. Direct labor costs were \)75,000.
Both sides of the journal totals$121,250.
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Question: Are there situations where Google can use process costing? Identify at least one and explain it.
Laffer Lumber produces bagged bark for use in landscaping. Production involves packaging bark chips in plastic bags in a bagging department. The following information describes production operations for October.
Bagging department | |
Direct material used | \(522,000 |
Direct labor used | \)130,000 |
Pre-determined overhead rate (based on direct labor) | 175% |
Goods transferred from bagging to finished goods | (\(595,000) |
The company’s revenue for the month totaled \)950,000 from credit sales, and its cost of goods sold for the month is $540,000. Prepare summary journal entries dated October 31 to record its October production activities for
(1) direct materials usage,
(2) direct labor incurred
(3) overhead allocation,
(4) goods transfer from production to finished goods, and
(5) credit sales.
Belda Co. makes organic juice in two departments: cutting and blending. Direct materials are added at the beginning of each process, and conversion costs are added evenly throughout each process. The company uses the FIFO method of process costing. During March, the cutting department completed and transferred 220,000 units to the blending department. Of the units completed, 10,000 were from beginning inventory and the remaining 210,000 were started and completed during the month. Beginning work in process was 75% complete with respect to direct materials and 60% complete with respect to conversion. The company has 40,000 units (50% complete with respect to direct materials and 30% complete with respect to conversion) in process at month-end. Information on the cutting department’s costs of beginning work in process inventory and costs added during the month follows.
Cost | Direct Materials | Conversion |
Of beginning work in process inventory | \( 16,800 | \) 97,720 |
Added during the month | 223,200 | 1,233,960 |
Required
Analysis Component
3. The company provides incentives to department managers by paying monthly bonuses based on their success in controlling costs per equivalent unit of production. Assume that the production department overestimates the percentage of completion for units in ending inventory with the result that its equivalent units of production for March are overstated. What impact does this error have on bonuses paid to the managers of the production department? What impact, if any, does this error have on these managers’ April bonuses?
The computer workstation furniture manufacturing that Santana Rey started for Business Solutions is progressing well. Santana uses a job order costing system to account for the production costs of this product line. Santana is wondering whether process costing might be a better method for her to keep track of and monitor her production costs.
Required
Prepare journal entries to record the following production activities.
1. Purchased \(80,000 of raw materials on credit.
2. Used \)42,000 of direct materials in production.
3. Used $22,500 of indirect materials in production.
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